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AUTHORIZED FOR ISSUANCE BY: Carman Lapointe-Young, VP, Internal Audit and Evaluation PREPARED FOR: FINAL ISSUANCE DATE: CONCLUSION: I. Gillespie, President & Chief Executive Officer; G. Ross, SVP Corporate Secretariat and Legal Services; E. Siegel, SVP MLTFS; A. Lawford, Compliance Officer March 26, 2004 In IAE's opinion, EDC satisfactorily complied with all relevant policy sections of the Code of Business Ethics in executing the Cernavoda transaction. Additionally, it is our opinion that EDC satisfactorily complied with the requirements of section D3 of the Disclosure Policy for this transaction.
TABLE
OF
CONTENTS
SECTION ONE: BACKGROUND SECTION TWO: PROJECT SCOPE SECTION THREE: ISSUES/FINDINGS SECTION FOUR: CONCLUSIONS SECTION FIVE: VICE PRESIDENT INTERNAI: AUDIT SIGNATURE
2. Is there evidence that EDC encouraged all project sponsors to whom it provided support to release the full EIA? (or to release more available environmental impact information?) 3. Is there evidence that EDC took comments from Sierra Club's review of the AECL summary into consideration? 4. Did EDC base its review on the AECL study, a summary of which was made available to the public in December 2001? 5. In EDC's review of the Environmental Impact Assessment (EIA), did EDC encourage those with whom it was doing business to use best practice with the aim of raising international environmental standards? 6. Was there anything that gave rise to concerns with respect to ethical conduct of EDC employees during the execution of this transaction?
Based on an analysis of the evidence, it is IAE s opinion that EDC satisfactorily complied with the above section of the policy
2. AECL only ever made Alleged Violation of Section D3 of EDC's available a summary of its Disclosure Policy. EIA in December 2001. As EDC endeavours to act Paragraph 3: "... EDC will encourage according to high all project sponsors to whom it is international standards and providing support to publicly release the best prevailing practices, available environmental impact this would require the full information" release of the EIA. This is especially true since EDC s client in this case is a government agency, and financing for this project is through the Canada Account.
EDC must encourage all project sponsors to whom it provides support to release available environmental impact information. Does documentation exist that demonstrates EDC's encouragement to the project sponsor to publicly release available Environmental Impact information? Did EDC consistently describe activities that demonstrate encouragement?
Verified
Based on analysis of the evidence, it is IAE s opinion that EDC satisfactorily complied with the above section of policy. 3. The review that the Sierra Club conducted of the AECL summary was endorsed by over sixty international NGOs, representing a large constituency of stakeholders whose opinions EDC has apparently made no effort to weigh. There is little evidence that EDC, for example, took these comments into consideration in its review, despite its commitment to being fair and respectful to all stakeholders . Alleged violation of Code of Business Ethics, Commitment to legal and ethical conduct section. Paragraph 1: "...It is also corporate policy that communication and relationships with stakeholders be truthful and transparent in a way that will withstand the highest degree of public scrutiny. Working relationships will be based on candor and openness, treating each other fairly and with respect, while acting with integrity, and weighing responsibilities to all stakeholders. EDC must treat all stakeholders fairly and with respect. Does documentation exist that demonstrates fair and respectful treatment of the Sierra Club and their comments? Did EDC consistently describe activities that demonstrate fair and respectful treatment of the Sierra Club and their comments? Verified
Based on analysis of the evidence, it is IAE s opinion that EDC satisfactorily complied with the above section of policy. 4. It is our understanding that EDC based its review on the EIA conducted by AECL, a summary of which was made 4 available to the public in December 2001. However, according to the Romanian Ministry of Waters and Alleged violation of Code of Business Ethics, Commitment to legal and ethical conduct section. EDC must conduct its business and affairs in accordance with the letter and spirit of all applicable laws in the countries in which it does business. Verified
EDC based its review on the EIA conducted by AECL, a summary of which was made available to the public in December 2001. However, according to the Romanian Ministry of Waters and Environmental Protection, AECL was not certified to carry out such a study, and furthermore, the Environmental Impact Summary (EIS) issued by AECL did not meet the national requirements in this matter (according to Ministrey Order 278/1996 and 125/1996 respectively). If EDC based its review on the AECL study, it was therefore basing its review on a document that had breached Romanian law.
Ethics, Commitment to legal and ethical conduct section. Paragraph 1: EDC will conduct its business and affairs in accordance with the letter and spirit of all applicable laws in the countries in which it does business. If any EDC employee or representative is ever uncertain as to the interpretation or application of a particular law, he or she must seek advice from Legal Services before taking action. Compliance with the law may, however, fall short of the standard of ethical conduct expected by EDC.
and affairs in accordance with the letter and spirit of all applicable laws in the countries in which it does business. Did EDC consider applicable Romanian law in its review of the EIA?
Based on analysis of the evidence, it is IAE s opinion that EDC satisfactorily complied with the above section of policy. 5. Given the omissions in the EIAs and breaches to host country law highlighted, it appears impossible that EDC could have reviewed the EIA using the highest international standards. Yet EDC s Code of Business Ethics asks the crown corporation to encourage best practices among those with whom it does business, with the aim of raising international environmental standards. This has not been achieved. Alleged violation of Code of Business Ethics, The Environment. Sentence 4: EDC will encourage best practices among those with whom it does business, with the aim of raising international environmental standards. EDC must encourage best practices among those with whom it does business, with the aim of raising international environmental standards. In their review of the EIA, did EDC use standards that are generally accepted as best practice internationally? Did EDC encourage those with whom it does business to meet these standards? 5
with the aim of raising international environmental standards. This has not been achieved.
Based on analysis of the evidence, it is IAE s opinion that EDC satisfactorily complied with the above section of policy.
SECTION FIVE: VICE PRESIDENT INTERNAL AUDIT SIGNATURE Carman Lapointe-Young Vice President, Internal Audit and Evaluation May 7, 2004 Date